Inditex Nine-Month Net Profit Rises on Sales Growth -- Update
December 13 2017 - 03:01AM
Dow Jones News
(Adds detail throughout)
By Jeannette Neumann and Alberto Delclaux
MADRID--Inditex SA (ITX.MC) said Wednesday that the winter sales
season got off to a more robust start than anticipated, offsetting
a slight slowdown in autumn sales that had been triggered by an
unseasonably warm October.
The world's largest fashion retailer by revenue said net profit
for the nine-month period ending Oct. 31 rose 6% from a year
earlier to 2.34 billion euros ($2.75 billion). Sales climbed 10% to
EUR17.96 billion. Both figures are roughly in line with analysts'
expectations, according to a poll by data provider FactSet.
The rise in sales picked up the pace in the first six weeks of
the fourth quarter, increasing 13% in local currencies from Nov. 1
to Dec. 11.
Inditex has eight brands, including Zara, Massimo Dutti and
Bershka.
The jump in sales implies an increase of around 7% in
like-for-like sales growth compared with a year earlier, according
to Macquarie Group analyst Andreas Inderst. That is an acceleration
from the 4% like-for-like sales growth at Inditex in its fiscal
third quarter. An unseasonably warm October in many European
capitals diminished demand for some of Zara's fall items in the
first part of Inditex's fiscal third quarter. Weather conditions
have since turned colder.
Analysts expect retailer Hennes & Mauritz, by comparison, to
report a decline in sales in stores that have been open for more
than a year.
Inditex's gross margin, a measure of profitability, fell to
57.4% in the nine months through Oct. 31 from 57.9% in the year-ago
period.
Shares in Inditex have fallen 5% since the beginning of the year
on investor concerns about the slight dip in profitability, which
has been driven down in part by a strengthening euro.
The company generates more than half of its sales in more than
five dozen non-euro currencies, so the weakening of those
currencies in comparison to the euro chips away at reported revenue
in euros.
Inditex feels the pain--or the gain--from currencies shifts more
than many other retailers because a majority of its sales are in
non-euro countries, but it has a high cost base in euros since its
various brand headquarters and logistics facilities are in
Spain.
Inditex shares, however, have fallen less than most peers
year-to-date.
In the nine months through Oct. 31, Inditex opened 212 new
stores, nearly half of them in its fiscal third quarter. That
brings the total number of stores to 7,504 in 94 markets versus
7,240 at the end of October 2016.
Inditex also continues to expand its online platforms. Zara's
online platform in India, for instance, launched in October, which
gives the brand an online presence in 45 markets.
Write to Jeannette Neumann at jeannette.neumann@wsj.com and
Alberto Delclaux at alberto.delclaux@wsj.com
(END) Dow Jones Newswires
December 13, 2017 02:46 ET (07:46 GMT)
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